Forget Retirement -- Start a Business

BOSTON ( TheStreet) -- Coming soon, brought to you by the wave of 76 million Baby Boomers entering their Golden Years: business start-ups instead of retirement.

That's the way John Rhett, chairman of SunTrust Investment Services, a unit of Atlanta-based SunTrust Banks ( STI), is starting to see it.

Rhett, based on retiring clients who have approached him and his colleagues for guidance on how to start a new business, thinks we are now seeing "the first inning" of a trend that could reshape the small-business landscape.

TheStreet spoke to him about how the newest generation of retirees differ from all others.

What is driving this desire to not only keep working, but to start a new business?

Rhett: Some of it is among people who have been in financial straits, having either been laid off or forced to take early retirement. They are still willing and wanting to work, and they have to find an alternative.

There are a lot of sleepless nights out there in the Baby Boomer world -- no doubt about it. They are looking at their 401(k)'s, and they are still down maybe an average of 15% to 20% and maybe even more. So they are saying, 'OK, my 401(k) isn't going to do what it would have in the past, what are my alternatives?' "

They are not really comfortable being more aggressive in the traditional sense within their 401(k)'s as far as equities and things like that, so they are looking at other ways to get a higher return, and that entrepreneurial side to things -- starting their own business -- is one of the things people are looking at.

A lot of this entrepreneurial desire is also more on the social side: "I'm too young to just sit back in my rocking chair or play golf."

Some are using their retirement savings to finance new ventures. Is that a wise idea?

Rhett: If you tap into your 401(k), or any qualified retirement plan, you have two sets of headwinds in your face. With what you take out, you are giving up the opportunity for that portion of money to grow. In traditional times, over the course of a five-year loan, you could have seen a 15% or 16% return on that money, cumulatively. If you pull money out, you are missing out on that.

Not only are you giving up the opportunity to make money, you also have to pay interest. It should be your last resort for funding a venture.

What are some alternatives?

Rhett: If you are sitting on low-yielding or no-yielding assets, that should be the first thing you think about using to fund a business. They are not making you much right now, and for the foreseeable future, short-term interest rates are not going up very much, if at all.

The second place to look, which is cheaper money than your 401(k), is the equity in your house and if you could increase the size of your mortgage. Mortgage rates are at an all-time low right now and, in most cases, the interest is deductible.

The third option would be trying to find a financial institution that would lend the money. That does assume, however, that you have credit quality, equity in your house or assets, and some people don't have that in today's world.

Are there common characteristics among so-called second-career entrepreneurs?

Rhett: This is something that is going to evolve over the next five years, but this entrepreneurial spirit is going to be very different from past generations. It is not a bricks-and-mortar desire. They don't want to open up a hardware store or a dry cleaners. They want to get involved in something that is more service-oriented or something where they can use technology. If you can run this new business, somehow, in a virtual environment, then you can balance making some money with having the freedom you really want after a 30- to 40-year career in corporate America.

There is also going to be a very willing workforce of people who are willing to help you. It will be easier as this network grows to draw on each others' resources and knowledge. You are not going to be in the dog-eat-dog world that you once were.